MAP Pricing

StoshuStoshu subscriber Posts: 3
edited December 2014 in Sales
Hello,
 
I`m hoping to get legal advice regarding MAP pricing (Minimum Advertised Pricing).  This is a practive wherebye manufacturers try to dictate to retailers the minimum price at which they will allow their products to be sold.  It has become very common among manufacturers who sell a lot to internet retailers.  I`m curious as to the legality of such practices.  It seems to me that it could be construed as something a kin to collusion but I don`t know.  Is there anyone who knows of the specific laws governing this type of thing?
 
Thank you!

Comments

  • kathleenfasanellakathleenfasanella subscriber Posts: 0
    Whithin the last 18 months, the Supreme Court ruled that manufacturers are vis-a vis entitled to reinforce their price points with vendors. It was based on a Texas case where a store was discounting some hand bags. Their vendor didn`t like it so they refused to sell to the store anymore. The store sued in retaliation. If I recall, part of the Supreme Court argument rested on the concept of an entity`s right to do business with those they choose to. Unless you are a utility (a monopoly) a business cannot be compelled to sell to anyone and the reasons they may choose to refuse are nobody`s business (unless it`s discrimination based on sex, race, religion etc). This is the right of refusal extended on a grand scale, better known as "no shirt, no service".
    Another reason a company can refuse to sell to a store is based on territory. Part of a company`s value (assets) is based on relationships ("good will") with key partners. For example, part of Mc Donald`s value is territory. Why would you buy a franchise from them if they would permit another person to buy a franchise and set up shop one block from you? These are complex arrangements that are governed in part by population density. For example, in my small town, Mc Donald`s may stipulate franchises are located X miles apart. In a place like NY or LA, it may be a matter of 6 blocks.
    Other businesses reinforce their price points by owning all of their outlets (the Mac Store). Again, Apple is not required to wholesale their products to anyone.
    Fwiw, there are reasons beyond the obvious as to why a manufacturer would want their price points enforced. For example, I wrote a book that contains genuine trade secrets (governing practices) that are not intended to be broadly available. The way these are kept from broad dissemination is through price points. If it`s cheap (can be discounted), then the information becomes widely available. If it`s more expensive, fewer people will buy it, only the most serious people will, those to whom the book is intended.
    This practice is very common in the realm of proprietary information that is sold. Usually available by subscription, prices can run from several hundred to several thousand dollars.
    It`s also a double edged sword as many manufacturers (newbies, assuredly) discover. In exchange for these exclusive agreements, a manufacturer cannot discount their products and undercut their retailers. For example, if I want to get rid of some excess inventory, I MUST notify my retailers first that they can discount the product and I will issue them a credit or refund to cover it. It is only then that I can sell consumer direct at the sale price. If I don`t do this, I run the risk of losing my wholesale customers because they are not required to buy from me, anymore than I am required to sell to them. They only possible exception is aging inventory, like last season`s old styles (fashion for example). Still, if a manufacturer has inventory on hand, they are best served by offering the deal to their retailers first. If the retailers don`t want to buy it, then the manufacturer can sell consumer direct at a discount. That is not to say a retailer will be happy about it because it dilutes the value of the brand if consumers know they only have to wait a season to buy goods at discount. It`s a very delicate balance.
  • StoshuStoshu subscriber Posts: 3
    Dear kathleenfasanella,
     
    You Rock!!!  Thank you for such a detailed (and fast) reply to my question.  I am actually a manufacturers rep firm and have a lot of manufacturers asking about the pricing policies of the retailers that I am proposing to market their lines to.  I wanted to offer them the option of MAP pricing in my contracts but wasn`t sure how legal that was.  As per your reply I will now offer my manufacturing clients the option of setting MAP pricing which I will then set as a stipulation to the retailers that want to carry their lines.  Thanks so much!
     
    Stoshu
  • kathleenfasanellakathleenfasanella subscriber Posts: 0
    What kinds of products are you representing? If it`s apparel or sewn products, my site will be very useful. Some tips applicable to many industries may be gleaned from this:
    http://www.fashion-incubator.com/archiv ... customers/
  • StoshuStoshu subscriber Posts: 3
    Thanks,
    No apparel at the moment but that`s not to say "never".  We operate in the gift industry and specialize in representing manufacturers only to internet retailers.  We`ve just started and all of our lines are hard goods at this point however apparel certainly has it`s place in the gift industry.
  • BoyGaryBoyGary subscriber Posts: 0
    This is a good reference about MAP pricing-- postive and negatives when buying medical equipment and supplies:
    http://www.quickmedical.com/blog/post/w ... icing.html
  • fundaypandefundaypande subscriber Posts: 0
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